Renewable Energy Certificates (RECs) vs. On-Site Generation: Which is Right for Your Illinois Business?
Renewable Energy Certificates (RECs) vs. On-Site Generation: Which is Right for Your Illinois Business?
Illinois businesses pursuing renewable energy have two primary pathways: invest in on-site generation (solar panels, wind turbines on your property) or purchase renewable energy through instruments like RECs or green tariff programs. Each path has distinct financial characteristics, environmental considerations, and practical constraints. Understanding tradeoffs enables optimal strategy selection.
On-site solar provides superior financial returns (5-8 year payback with incentives) and visible sustainability commitment. RECs enable renewable energy procurement without capital investment or space constraints, but at ongoing cost and without bill reduction. Sophisticated businesses often combine approaches—maximizing on-site generation, supplementing with RECs for remaining renewable goal, achieving 100% renewable electricity while optimizing financial returns.
This comprehensive guide compares on-site generation and RECs, analyzes financial tradeoffs, and provides selection framework for optimal renewable energy strategy.
Financial and Operational Comparison
5-Year and 10-Year Cost Analysis
On-Site Solar (5 kW system, typical office):
- Equipment: $20,000
- Incentives (ITC + rebates): -$8,000
- Net cost: $12,000
- Annual generation: 6,000 kWh
- Annual bill reduction: $600-$800
- 5-year net cost: $12,000 - ($700 avg savings × 5) = $8,500
- 10-year cumulative benefit: $12,000 cost - ($700 × 10) = $5,000 net benefit to business
REC Program (equivalent 6,000 kWh annual commitment):
- Annual REC cost: $300/MWh × 6 MWh = $1,800/year
- 5-year cost: $9,000
- 10-year cost: $18,000
- Incentive savings: Minimal (possibly $500-$1,000 over period)
- 10-year net cost: $17,000 cost to business (no offsetting bill reduction)
Conclusion: On-site solar superior 10+ year financial outcome; RECs higher ongoing cost without bill benefit. However, RECs enable renewable commitment when on-site generation not feasible.
Practical Constraints and Flexibility
On-site Generation:
- Fixed to property (can't change suppliers/providers easily)
- Ownership carries maintenance responsibility
- Long-term commitment (25+ year asset)
- Visible, tangible commitment
RECs/Green Tariff:
- Flexible (can adjust participation annually)
- No maintenance responsibility
- Month-to-month or annual commitment typical
- Abstract (no physical visible asset)
Strategic Selection Framework
Choose On-Site Generation When:
- Adequate sun exposure (south-facing roof, minimal shading)
- Long-term occupancy (5+ years)
- Capital available or C-PACE financing accessible
- Ownership of property (not leasing)
Choose RECs When:
- Limited roof space (constrained property, urban facility)
- Tenant situation (no landlord cooperation)
- Short occupancy timeline
- Capital constraints
- Zoning restrictions
Choose Hybrid Approach When:
- Maximize on-site generation (capture financial savings)
- Supplement with RECs (achieve 100% renewable goal without capital-constrained limitations)
- Typical approach for most Illinois businesses pursuing comprehensive renewable commitment
Sources:
Frequently Asked Questions
QWhat is the difference between RECs and on-site renewable generation?
On-site generation (solar, wind): Physical installation at your facility, generating electricity directly consumed on-site. You own the equipment and generation. RECs (Renewable Energy Certificates): Tradable instruments representing proof of renewable generation from utility-scale facilities elsewhere. You purchase RECs without owning/operating generation equipment. Financial difference: On-site generation provides bill reduction (consumption offset), plus potential grid export revenue; RECs provide environmental claim (you funded renewable generation) but no direct bill reduction. Analogy: On-site = you build a solar farm for your facility; REC = you pay utility/developer to build solar farm for the grid, receiving environmental credit.
QWhat are the financial tradeoffs between RECs and on-site solar?
On-site solar (5 kW typical office installation): $20,000 equipment cost, 30% federal ITC = $6,000 credit, utility rebates = $2,000-$5,000, net cost = $9,000-$12,000. Annual generation: 6,000 kWh, value at $0.10/kWh = $600/year savings, plus grid export value = $7,500-$10,000 net value over 25-year lifespan. RECs (5 MWh equivalent annual coverage): Cost $250-$500/MWh typical = $1,250-$2,500/year. Over 25 years = $31,250-$62,500 cost. Financial comparison: On-site solar superior economics (lower total cost, positive ROI). RECs purely environmental claim (cost, no direct bill benefit). Strategic approach: On-site solar when feasible (better economics), RECs supplementary (green tariff) for remaining consumption or when on-site not possible.
QWhat is the environmental impact difference?
On-site generation (environmental accounting): You receive Renewable Energy Certificates (RECs) from your generation, enabling you to claim carbon reduction. Owned/operational responsibility clear. RECs (environmental accounting): Environmental benefit same (MWh of renewable generation is MWh regardless of location), but generation elsewhere (you're funding remote facility). Carbon accounting identical: Both can claim renewable energy procurement. Regulatory compliance identical: Both count toward CEJA requirements. Practical consideration: On-site generation may provide additional environmental/educational value (visible, tangible, employee/customer communication opportunity); RECs more abstract (no physical infrastructure visible). For climate impact: Equivalent; choice based on financial and practical factors.
QWhen is on-site generation preferable vs RECs?
On-site generation preferable when: 1) Adequate rooftop/land (minimum 500-1000 sq ft for meaningful system), 2) South-facing exposure (Illinois good solar resource), 3) Ownership longevity (planning 10+ year occupancy), 4) Roof condition (good structural integrity), 5) Local zoning permits (some areas restrict installations). RECs preferable when: 1) Limited/no roof space (urban facility, constrained property), 2) Tenant situation (no landlord cooperation), 3) Short occupancy timeline, 4) Zoning restrictions/visibility concerns, 5) Capital constraints (REC subscription programs enable monthly payments). Optimal strategy: On-site solar when feasible (better ROI), RECs/green tariff for remaining renewable goal (combining approaches).
QWhat Illinois incentives apply to on-site generation vs RECs?
On-site solar incentives: Federal 30% ITC, ComEd/Ameren rebates ($0.25-$0.50/watt), CEJA rebates/grants (additional 10-20% enhancement possible), C-PACE financing (100% project cost), Illinois state grants (up to $50,000 for qualifying projects). Total incentive coverage: 50-70% project cost typical. REC program incentives: Utility/ComEd Green Power Connection program sometimes includes rebates for REC purchases (reducing premium cost), federal tax credits not available for REC purchases. CEJA programs may enhance green energy procurement support. Total incentive coverage: 10-30% cost reduction typical. Financial advantage: On-site generation has substantially better incentive support, making net cost lower and ROI superior.